Correlation Between TUI AG and TripAdvisor

Can any of the company-specific risk be diversified away by investing in both TUI AG and TripAdvisor at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining TUI AG and TripAdvisor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TUI AG and TripAdvisor, you can compare the effects of market volatilities on TUI AG and TripAdvisor and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in TUI AG with a short position of TripAdvisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of TUI AG and TripAdvisor.

Diversification Opportunities for TUI AG and TripAdvisor

0.79

Correlation Coefficient

TUI AG  TripAdvisor

Poor diversification

The 3 months correlation between TUI and TripAdvisor is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding TUI AG and TripAdvisor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TripAdvisor and TUI AG is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on TUI AG are associated (or correlated) with TripAdvisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TripAdvisor has no effect on the direction of TUI AG i.e., TUI AG and TripAdvisor go up and down completely randomly.

Pair Corralation between TUI AG and TripAdvisor

Assuming the 90 days trading horizon TUI AG is expected to generate 0.79 times more return on investment than TripAdvisor. However, TUI AG is 1.26 times less risky than TripAdvisor. It trades about 0.24 of its potential returns per unit of risk. TripAdvisor is currently generating about 0.07 per unit of risk. If you would invest  591.00  in TUI AG on September 5, 2024 and sell it today you would earn a total of  194.00  from holding TUI AG or generate 32.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

TUI AG  vs.  TripAdvisor

TUI AG

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TUI AG are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, TUI AG exhibited solid returns over the last few months and may actually be approaching a breakup point.

TripAdvisor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TripAdvisor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TripAdvisor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with TUI AG and TripAdvisor

The main advantage of trading using opposite TUI AG and TripAdvisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TUI AG position performs unexpectedly, TripAdvisor can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in TripAdvisor will offset losses from the drop in TripAdvisor's long position.

The idea behind TUI AG and TripAdvisor pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.